David John testified before Oregon’s Retirement Savings Task Force on May 14, 2014. While this testimony is generally focused on Oregon, it also covers important issues facing other states that are considering a state-sponsored retirement savings plan for private sector small business employees.
A significant number of Americans lack sufficient retirement savings and will face retirement with little beyond their Social Security benefits. While Social Security is an essential part of a secure retirement, its retirement benefits are not high enough to provide most Americans with a comfortable retirement.
Small business employees are much less likely to have access to a retirement savings plan than those employed by larger companies. This testimony discusses why most existing small business retirement savings products are either expensive and complex or require an employer contribution. It also discusses why workers with an employer-based retirement savings plan are much more likely to have significant retirement assets than those without such a plan.
Employees without access to an employer-based plan would benefit from a state-sponsored retirement savings plan for small businesses. This testimony includes a short discussion about how to structure a state-sponsored plan that is likely to be acceptable under today’s federal ERISA law as well as a set of best practices for such a plan. While the type of plan that is currently acceptable under ERISA does not offer many of the features that many proponents would like to see, it should be seen as a start that can be improved when federal limitations are liberalized.